Inflation Drops by 2% in June

Statistics from the Kenya National Bureau of Statistics (KNBS) released last week show that the inflation rate dropped from 12% in the month of May to 10% in the month of June. Good news, right? Probably it is; but maybe only to the guys who come up with the figures or some few fellows who understand what economics is all about.

This could be the best of news as we have lived through a period of high inflation which in turn pushed up interest rates, making borrowing a hustle. People who had loans had to go back to their banks to restructure their loan agreements to fit into the then prevailing high inflation rates. Cost of living went up, with oil prices shooting up every time the Energy Regulatory Commission (ERC) came to make its announcements. Life was becoming unbearable to many common mwananchis who have no idea of what this inflation thing is all about.

But thanks to the recovering economy, now the inflation rates are headed south and are nearing the one digit level. We could then expect the banks to lower their interest rates and prices of many commodities and services to drop as well.

However, since the rates started coming down, the banks have not proportionately lowered their interest rates. This raises a question of whether they are really acting in the best interest of our economy or they are only blinded by profits? On the other hand, prices of oil and other basic food stuffs have not shown a significant drop, and we are waiting to see what is up next for this month of July.

The figures from KNBS could be saying one thing, and what is happening on the ground could be totally different. However, with meager optimism, we could say that there are some changes also on the ground towards the positive – a fall in price levels.


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